Trichet Says ECB Focused on Prices, Growth Will Slow

By Brian Swint and Christian Vits

Aug. 7 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said the bank remains focused on bringing down inflation even as economic growth slows.

Inflation is ``likely to remain well above levels consistent with price stability for a protracted period of time,'' Trichet said at a press conference today in Frankfurt, after the bank kept its benchmark rate at 4.25 percent. ``Risks to price stability over the medium term remain on the upside,'' while economic growth risks ``are materializing.''

The ECB raised interest rates last month to discourage unions from lifting wage demands and companies from raising prices in response to the fastest inflation in 16 years. Policy makers are balancing that concern against weakening economic growth after confidence dropped the most since the Sept. 11 terrorist attacks.

The euro fell as much as 0.7 percent to $1.5408 as of 3:07 p.m. in Frankfurt.

Trichet said that growth will be ``particularly weak'' in the second and third quarters. While the bank has ``no bias'' on the direction of interest rates, policy makers still have ``very strong concern'' about wages, he said.

``We're never pre-committed and we always do what is needed to deliver price stability,'' he said.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net. Christian Vits in Frankfurt at cvits@bloomberg.net